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Bombshell criminal charges lay out 'pay-to-play' culture in New York

ALBANY – A massive pay-to-play scheme involving alleged bid rigging of state contracts involving hundreds of millions of dollars in taxpayer money was outlined by federal prosecutors Thursday in a case that targets longtime advisers and major donors of Gov. Andrew M. Cuomo.

[Update from Friday: Cuomo says corruption case won't stop Buffalo Billion success, projects to be overseen by Zemsky]

Manhattan-based U.S. Attorney Preet Bharara’s case alleges bribery, extortion and tax evasion. It also muddies a picture of ethical cleanliness that Cuomo has sought to portray of his administration since taking office in 2011.



Bharara, the prosecutor who has brought high-profile and successful cases against a lineup of state legislators, said Albany’s plague of corruption has now touched the executive branch of government.

“I really do hope that there’s a trial in this case so all New Yorkers can see in gory detail what their state government has been up to,” Bharara said in unveiling the Justice Department’s case against nine people, including Cuomo advisers Joseph Percoco and Todd R. Howe, and Alain E. Kaloyeros, president of SUNY Polytechnic Institute.

[David Robinson: What the corruption charges will mean for the Buffalo Billion]

[What we know about the corruption charges involving the Buffalo Billion]

Louis P. Ciminelli, the Buffalo developer who is chairman and CEO of LPCiminelli, also is accused in the pay-to-play scheme. But allegations stretch across the state:

• In Buffalo, Bharara says the state’s bidding process for the factory being built for SolarCity at RiverBend in South Buffalo turned into a “criminal” enterprise that favored LPCiminelli, where company executives were given inside information about how the deal was to be awarded. Three LPCiminelli executives, including Louis Ciminelli, were charged Thursday with various felonies.

• In Syracuse, COR Development was aided in what Bharara called a similar bid-rigging scheme and, in addition, funneled bribe money to Percoco, who has served Cuomo in capacities ranging from senior government advisor to campaign manager. Two COR executives were arrested Thursday for what prosecutors said was a deal to trade payments to Percoco for help with various business dealings before the Cuomo administration;

• Downstate, an energy company funneled more than $287,000 in cash, plus gifts such as expensive meals and a saltwater fishing trip off the Hamptons on Long Island, to Percoco or his wife in exchange for Percoco’s “official assistance … on an as-needed basis.”

• In Albany, a separate case brought Thursday by Attorney General Eric T. Schneiderman alleges that Kaloyeros personally enriched himself through dealings with a major area developer, Columbia Development, and an architectural firm. The bid-rigging case against Kaloyeros and Columbia Development, including a dormitory project, led to state charges against Kaloyeros and the president of the development firm, Joseph R. Nicolla.

All but one of the defendants, through their lawyers, denied the charges and pleaded not guilty in court appearances in Buffalo, Syracuse and Manhattan.

“We are confident everyone will be vindicated,” LPCiminelli said in a statement about the charges against its executives.


Howe, however, already pleaded guilty Tuesday to eight felony counts, including tax evasion and wire fraud, Bharara revealed Thursday afternoon. Howe wore many hats in the alleged scheme: consultant for LPCiminelli and COR and paid adviser to Kaloyeros’ college at a time, for instance, when the Buffalo and Syracuse bidding deals were underway.
The federal prosecutor parsed his words carefully when asked whether the case touched Cuomo.
“What I can say at this moment is that there is no allegation of any wrongdoing or misconduct by the governor anywhere in this complaint. That is all I’m going to say,” Bharara said.
Cuomo, in a statement, said he is “saddened and profoundly disappointed” if the allegations against Percoco are true. “I have zero tolerance for abuse of the public trust from anyone,” Cuomo said. The governor did not address the allegations that Bharara made against the upstate projects.

[READ THE CHARGES: PDF: U.S. v. Todd Howe  |  PDF: Percoco et al complaint]

The Buffalo Billion program has been one of Cuomo’s signature upstate job-creation plans since he announced it in 2012. On Thursday, Bharara had a longer name for the program: “The Buffalo Billion Fraud and Bribery Scheme.”

The prosecutor said several criminal acts were committed in the bidding process to benefit the politically connected LPCiminelli. And Howe, who has known Cuomo for parts of four decades, had a big hand in the scheme, he said. So did Kaloyeros, who Cuomo has called a “visionary” and was charged with leading major upstate projects for the governor, Bharara said.
Joseph Percoco, a former top aide to Gov. Andrew Cuomo. (Harry Scull Jr./News file photo)

Joseph Percoco, a former top aide to Gov. Andrew Cuomo. (Harry Scull Jr./News file photo)

Charges were lodged against Ciminelli and two employees from his firm: Kevin C. Schuler and Michael W. Laipple. The three were accused of paying bribes and conspiring with Howe and Kaloyeros beginning in 2013 in “a scheme to defraud” Fort Schuyler Management Corp., a state university-created entity that helps run the Buffalo Billion and other upstate projects that Cuomo touted as his signature economic-development efforts. Fort Schuyler ran the Buffalo Billion bidding process that led to RiverBend.

State payments for RiverBend, for instance, were approved by Cuomo’s economic-development agency and administered through Fort Schuyler, which was closely associated with Kaloyeros. Fort Schuyler selected LPCiminelli as the lead contractor for the RiverBend project in a bid process that was criticized for favoring the Buffalo company.

The federal complaint accuses LPCiminelli executives of paying bribes to Howe in the form of consulting fees. Howe worked for LPCiminelli in addition for Kaloyeros’ college and the SUNY Research Foundation. Howe was fired earlier this year from his Albany-based lobbying firm, Whiteman, Osterman & Hanna. In exchange for those payments, the complaint alleges, Howe worked with Kaloyeros to “secretly” rig the bidding process to favor LPCiminelli for the Buffalo deal and COR Development for a separate project in Central New York. Prosecutors say Kaloyeros and Howe “designed the requirements” for the Buffalo bidding process that misled the Fort Schuyler board into thinking the process was fair.

[What Cuomo has said about the investigation]

Kaloyeros told Howe that he wanted to hire him to help his Albany-based college “in its relationship” with Cuomo’s office. Prosecutors say Howe was paid $25,000 per month to serve as a consultant to Kaloyeros’ college and the Fort Schuyler entity.

LPCiminelli also paid Howe through 2013 and 2014, even while “knowing he was acting as an agent and representative” for Kaloyeros’ college, the complaint states. It alleges that LPCiminelli’s intent in hiring Howe was to use his “official position for their benefit.”

The federal complaint also states that about January 2013, as LPCiminelli was seeking contracts through Cuomo’s Buffalo Billion program, the construction company also signed a deal on behalf with Howe’s lobbying firm to provide “strategic advice and counsel” regarding business initiatives across the state. LPCiminelli paid $100,000 a year for Howe’s work.

[Kaloyeros was hoping to repeat his Albany success in Buffalo]

The complaint states that LPCiminelli hired Howe while knowing of his “substantial influence” with Kaloyeros, as well as others connected with the Fort Schuyler group. Howe directly told Ciminelli that he “was acting on behalf of the office of the governor” and Kaloyeros’ college, then known as College of Nanoscale Science and Engineering – which at the time were both looking to do big economic-development projects in Buffalo.

The complaint states that Howe illustrated his connected ways by providing emails to LPCiminelli executives about the timing and method of the announcement for the bidding process of the Buffalo Billion projects. Executives with LPCiminelli, including Ciminelli, along with the Syracuse development firm, “had become significant contributors to the governor’s election campaigns,” the complaint notes.

Prosecutors say that those contributions were “at least in part to develop a relationship with the office of the governor that would help enable the Syracuse developer and the Buffalo developer to obtain state-funded development contracts.”

[Related: 'Ziti' was code for bribes in messages between corruption case players]

The complaint cites such evidence as Percoco making “specific requests” that LPCiminelli make donations to Cuomo’s campaign. Percoco went so far as to email Howe that Ciminelli’s commitment to raise $175,000 at a Buffalo fundraiser “does not work” because Ciminelli previously promised to bring in more donations. Ultimately, the Ciminelli-hosted fundraiser, held Nov. 19, 2013, raised $250,000, the complaint alleges. The Buffalo News previously reported on that fundraiser, which Cuomo attended at the Hyatt Regency Buffalo, along with a smaller gathering of high-roller donors at Bacchus Wine Bar & Restaurant.

Two days later, Cuomo returned to Buffalo to announce an initial proposed project for RiverBend.

The subheadline in one section of the federal complaint states that Fort Schuyler was “defrauded into awarding state development contracts” for both the Buffalo Billion deal and a Syracuse project.

Alain Kaloyeros.

Alain Kaloyeros.

The complaint alleges that LPCiminelli and COR Development were tapped after “each made sizeable contributions” to Cuomo and had begun paying Howe for his “access to the governor and for Howe’s influence.”

The complaint noted that Cuomo’s RiverBend announcement in November 2013 was more than three months after Howe had forwarded inside information to Laipple. This information about the project were not shared with other developers.

Kaloyeros, meanwhile, was going right to the top at LPCimninelli. On September 9, 2013, he sent an email to Ciminelli that was a “draft of the relevant sections” of the upcoming request for proposal that Fort Schuyler intended to issue.

“Hopefully this should give you a sense of where we’re going with this. … Thoughts?” Kaloyeros wrote to Ciminelli.

This draft contained information about wanting only developers with a certain number of years of experience. Critics later said that this language prevented competitors from bidding on the project.

Fort Schuyler later amended that requirement after at least one of the bidders complained.


Kevin Schuler, center, gets escorted out of Buffalo federal court on Sept. 22. (Robert Kirkham/Buffalo News)

Kevin Schuler, center, gets escorted out of Buffalo federal court on Sept. 22. (Robert Kirkham/Buffalo News)

Schuyler sent Kaloyeros an email at about the same time, noting the 50 years’ of experience by Ciminelli’s firm. Prosecutors said the original request for proposals, or RFP, which demanded the 50 years of experience, was meant to “further tailor” the bid in LPCiminelli’s behalf.

Two days later, the demand was amended to 15 years’ experience. Officials at the time cited a typographical error. Prosecutors said the alleged error came despite Kaloyeros’ reputation to “closely edit” all bidding proposals by Fort Schuyler.
Prosecutors dispute that the requirement of 50 years was an innocent error.

“Grrrrr,” one LPCiminelli executive wrote to Ciminelli and Schuler about the 50-year demand.

“50 was a bit obnoxious,” Schuler wrote back. He later wrote, following the change to 15 years, that the revision “is still pretty good.”

Bharara said the contract process was not just obnoxious, but criminal.

The federal complaint states that Schuler was concerned that Cuomo’s announcement of RiverBend while the overall Buffalo Billion bidding was underway could jeopardize “the improper advantage” that LPCiminelli had for the Buffalo Billion deal.
Todd Howe. (Will Waldron/Times Union file photo)

Todd Howe. (Will Waldron/Times Union file photo)

Percoco has been among Cuomo’s closest and most loyal aides over the years. “One of the most powerful people in all of New York was on the take,” Bharara said of Percoco.

The bribes included money that Percoco received while he left his state job to serve as Cuomo’s 2014 re-election campaign manager, Bharara alleges.

[GALLERY: A look at instances of corruption by state officials]

Besides receiving payments from COR, he also was paid by an “energy company,” the complaint states. That company has been identified as Competitive Power Ventures, which was looking to build a power plant in the lower Hudson Valley.
Between COR and the energy firm, Percoco and his wife, Lisa Toscano-Percoco, received what prosecutors characterized as bribe money totaling more than $300,000 over a four-year period – intended to benefit a top Cuomo adviser who could help them with various business dealings before the state.


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